The differentiation of neuroblasts into neurons involves morphological as well as biochemical changes, a process which is poorly understood. A cloned cell line of undifferentiated neuroblasts [CBSV] has been found to differentiate spontaneously under defined conditions, but can also be induced to undergo morphological change by calcium ionophore and isobutylmethyl xanthine (an inhibitor of phosphodiesterase) under non-differentiating conditions. This chemical induction of differentiation is accompanied by increases in neurotransmitter-responsive adenylate cyclase activity and membrance phospholipids more characteristic of adult neuronal tissue. The ganglioside pattern of both differentiated and undifferentiated CBSV cells is similar, neither having more complex gangliosides characteristic of normal neurons. However, chemical induction of differentiation results in the appearance of specific tetanus toxin binding, usually taken as a specific neuronal marker. These data suggest that CBSV cells represent a good model system for examining factors whih regulate normal neuronal differentiation during development.